Parthenon posts 90% IRR on med tech deal

Parthenon Capital has sold its controlling stake in Spheris, a US medical transcription business, to private equity groups Warburg Pincus and Soros Private Equity for an undisclosed amount.

US private equity groups Warburg Pincus and Soros Private Equity are the new controlling shareholders of Spheris, a medical transcription technology and outsourcing services company based in Franklin, Tennessee.

The two groups have agreed to purchase the business from Parthenon Capital, a US mid-market investor with offices in Boston and San Francisco. Financial details of the deal have not been disclosed, although Ernest Jacquet, co-CEO of Parthenon Capital, said that his firm had achieved an internal rate of return of 90 percent from its investment in Spheris.

The company is the product of a buy-and-build strategy that Parthenon embarked on in 2001. That year, investing from its $350 million 1998 debut fund, the firm acquired Total eMed as a platform for a roll-up. In June 2003, Total eMed acquired its competitor EDiX to create Spheris, which is now the second-largest US company in its field. Parthenon funded the acquisition from its second fund, which closed on September 2001 on $750 million.

Following the sale of the company to Soros and Warburg Pincus, Parthenon ceases to be a shareholder in Spheris. The company’s existing management team, will continue to run the business and remain minority shareholders.

Joel Ackerman and David Wenstrup of Warburg Pincus as well as Neal Moskowski and Jonathan Bilzin will join Spheris’ board of directors.

Harris Williams & Company, a middle market investment banking firm based in Richmond, Virginia, represented Spheris and Parthenon Capital in the transaction.